April 24, 2018 / 3:14 PM / a month ago

CORRECTED-TREASURIES-U.S. 10-year yield hits 3 pct ahead of $32 bln 2-year auction

 (Corrects name, title, location in 9th paragraph)
    * U.S. to sell $32 bln two-year, fixed-rate notes
    * U.S. 2-year yield rise to 2.5 pct, highest since Sept.
2008
    * U.S. 10-year yield touches 3 pct for first time in four
years  

    By Richard Leong
    NEW YORK, April 24 (Reuters) - U.S. Treasury prices fell on
Tuesday, with the 10-year yield hitting 3 percent for the first
time in over four years ahead of a $32 billion auction of a new
two-year notes, which is part of this week's $96 billion in
fixed-rate government debt supply.
    Inflation concerns due to rising commodity prices, along 
with worries about growing Treasury supply, have stoked selling
in Treasuries since late last week, analysts said.
    The move propelled the 10-year yield above 3 percent to its
highest since January 2014 and steepened the yield curve from
its flattest level in more than a decade last week, Reuters data
showed.
    "The market is quite concerned about commodity prices across
the board with the exception of agricultural prices. They feed
into inflation," said Rob Waldner, chief strategist at Invesco
Fixed Income in Atlanta.
    Oil and many industrial metal prices have climbed on strong
global demand, while soy, sorghum and other crop prices have
been pressured by the trade tension between the United States
and China, the world's two biggest economies.
    Some traders, while expecting the 10-year yield to breach 3
percent as inevitable, said it is not a harbinger of a market
rout due to evidence of buying in the past 24 hours emerging
when the 10-year yield moves near that threshold.
    At 10:38 a.m. (1429 GMT), the 10-year Treasury yield
 was up over 1 basis point at 2.986 percent after
rising to 3.003 percent, which was the highest since Jan. 2014.
    The two-year yield touched 2.500 percent, which
was last seen in September 2008 before subsiding to 2.487
percent, up 1 basis point on the day.
    “These are psychologically and technically notable levels.
They will continue to press higher through the end of the year,"
said Bill Northey, senior vice president with U.S. Bank Wealth
Management in Helena, Montana.
    The spread between two-year and 10-year yields
 widened modestly to 49.6 basis points after
narrowing to 41.1 basis points, its tightest level in over a
decade last Wednesday.
    At 1 p.m. (1700 GMT), the Treasury will sell its last
two-year fixed-rate debt, which traders expected would fetch a
yield of 2.512 percent.
    The Treasury will sell $35 billion of five-year securities
 on Wednesday along with $17 billion in two-year
floating-rate notes. It will auction $29 billion of seven-year
debt on Thursday.
    Most analysts said this week's Treasury supply will likely
attract decent buying as demand from yield-minded investors
offsets concerns about further rate increases from the Federal
Reserve.
April 24 Tuesday 10:37AM / 1437
                               Price                   
 US T BONDS JUN8               142-24/32    -0-7/32    
 10YR TNotes JUN8              119-68/256   -0-16/256  
                               Price        Current    Net
                                            Yield %    Change
                                                       (bps)
 Three-month bills             1.8425       1.8769     0.052
 Six-month bills               1.9975       2.0459     0.008
 Two-year note                 99-142/256   2.4871     0.013
 Three-year note               99-60/256    2.6444     0.011
 Five-year note                98-128/256   2.8278     0.009
 Seven-year note               98           2.9459     0.010
 10-year note                  98           2.9864     0.013
 30-year bond                  97-8/256     3.1542     0.011
                                                       
   DOLLAR SWAP SPREADS                                 
                               Last (bps)   Net        
                                            Change     
                                            (bps)      
 U.S. 2-year dollar swap        26.75        -0.50     
 spread                                                
 U.S. 3-year dollar swap        21.00        -0.25     
 spread                                                
 U.S. 5-year dollar swap        10.50         0.25     
 spread                                                
 U.S. 10-year dollar swap        2.75         0.25     
 spread                                                
 U.S. 30-year dollar swap      -12.25         0.75     
 spread                                                
 

    

    
 (Reporting by Richard Leong; Editing by Dan Grebler)
  
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